MBIA Insurance Corporation

AAA

DEFINITION of 'MBIA Insurance Corporation'

A division of publicly-traded MBIA, Inc, and a primary worldwide issuer of financial guarantee insurance. Used to back municipal bonds and structured finance products, MBIA insurance is used as an avenue to credit enhancement, as MBIA's insurance promises to pay interest and principal on any bonds that suffer an issuer default.  

The presence of MBIA insurance on a municipal bond typically ensures an 'AAA' rating or its equivalent from the major ratings agencies and also makes the bonds much more marketable to investors.

INVESTOPEDIA EXPLAINS 'MBIA Insurance Corporation'

Bond issuers may find they can even lower the total cost of issuing debt by purchasing MBIA insurance, as the higher rating the bonds would garner could allow the issuer to lower the coupon rate to investors.  

MBIA and its competitors try to keep their own credit ratings at the highest levels, as this obviously makes their services much more valuable to clients and investors. They do this by diversifying their insured portfolios across nation, sector and asset classes, and also by keeping certain measures of financial leverage below dangerous thresholds.

RELATED TERMS
  1. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  2. Investment Grade

    A rating that indicates that a municipal or corporate bond has ...
  3. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Bond Insurance

    A type of insurance policy that a bond issuer purchases that ...
Related Articles
  1. The Basics Of Municipal Bonds
    Bonds & Fixed Income

    The Basics Of Municipal Bonds

  2. Who Is To Blame For The Subprime Crisis?
    Mutual Funds & ETFs

    Who Is To Blame For The Subprime Crisis?

  3. Fatal Seduction Of The Municipal Bond ...
    Mutual Funds & ETFs

    Fatal Seduction Of The Municipal Bond ...

  4. What does investment grade mean?
    Investing

    What does investment grade mean?

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center